25 x 4 or 33 x 3

[frugal]

Hello everybody,

Happy 2023!

After years having 25 x 4 I see CASH doing nothing and I never used it.

Since I have other incomes I didn't add up to Cash and only increased Stocks, Bonds and Gold.

Now I am like this:

Asset Class Actual Percent
Stock 30,30%
Bonds 25,36%
Cash 15,45%
Gold 28,89%

My wealth grows more per year than the cash portion...

Please help me what should I do with your wisdom.

Thank you.

[Hal]

OK, so HB said cash was for a "Tight money recession" (ie High interest rates to slow the economy)

Not sure where you live, but if interest rates are low, then cash won't be doing much for you. But then in a balanced portfolio, there will always be one asset class not doing well. eg bonds during inflation.

HB also stated he could not find an asset that went up in value during a tight money recession, so he used cash which held its value

This is just my opinion. "IF" you are not near retirement you could eliminate cash and go for a more volatile, higher return, 3x33 portfolio.

[yankees60]

OK, so HB said cash was for a "Tight money recession" (ie High interest rates to slow the economy)

Not sure where you live, but if interest rates are low, then cash won't be doing much for you. But then in a balanced portfolio, there will always be one asset class not doing well. eg bonds during inflation.

HB also stated he could not find an asset that went up in value during a tight money recession, so he used cash which held its value

This is just my opinion. "IF" you are not near retirement you could eliminate cash and go for a more volatile, higher return, 3x33 portfolio.

I am almost certain that Frugal is not in the United States.

[frugal]

Hi buddies,

I have an EU-PP because I live in europe.

[Smith1776]

Keep the cash! It serves a purpose as a buffer and is great with rising rates and volatility.

[Hal]

Hi buddies,

I have an EU-PP because I live in europe.

Perhaps diversify internationally, say ~ 17% Gold, 83% https://fund-docs.vanguard.com/LifeStra ... INT_DU.pdf ?

You get some exposure to US treasuries that way.
And no I can't read Dutch, just used that Vanguard fund as an example.

Edit: Reference => https://web.archive.org/web/20160303215 ... sting.com/
You will have to calculate Bond duration/Suitable Life Strategy fund if you take this approach

[Mark Leavy]

Hello everybody,

Happy 2023!
After years having 25 x 4 I see CASH doing nothing and I never used it.
<snip>

Hi frugal! Happy 2023!

I found a really good discussion on this topic here.

I've been checking monthly only because I got into the habit of tracking expenses and finances on a monthly basis. It's fun for tracking purposes, but checking asset proportions that often is like watching paint dry. Rebalance events happen every 2-3 years, more or less depending on how you're handling contributions. Checking once a quarter is easily enough. I do like to log into each account at least that often, and that's a good way to remind myself to do it.

Hi Sophie!!!

What do you think of having a EU-PP with 3 assets except CASH, having other resources outside of PP for that.

Please comment.

[frugal]

Hello friends,

On the last years I am earning more each year and saving than I have in cash.

So, if I have other income outside of PP I can exclude cash

Thank you

[Grinch]

What about
ISIN: LU1829219556
WKN: LYX0Z6
Ticker: LYS4

[seajay]

In addition to asset diversification, the PP includes individual assets volatility diversification. Blending high and low volatility assets is part of the PP's engine design.

Swapping to slick from regular tires may very well win one sunny day race, but prove to be critical in another rainy day race. End up with a overall worse case outcome average than had you just consistently stuck with the regular setup throughout. As does attempting to time assets also tend to broadly be worse than just sticking with the regular setup. Better to just look to consistently finish each race than roar ahead of others during some races, crash and burn in another. You'll likely not be on the seasons winners podium, but neither will you be in the graveyard.

[frugal]

What about
ISIN: LU1829219556
WKN: LYX0Z6
Ticker: LYS4

or IBCA

But it has very poor performance and should me better to hold on ordinary account .

[frugal]

In addition to asset diversification, the PP includes individual assets volatility diversification. Blending high and low volatility assets is part of the PP's engine design.

Swapping to slick from regular tires may very well win one sunny day race, but prove to be critical in another rainy day race. End up with a overall worse case outcome average than had you just consistently stuck with the regular setup throughout. As does attempting to time assets also tend to broadly be worse than just sticking with the regular setup. Better to just look to consistently finish each race than roar ahead of others during some races, crash and burn in another. You'll likely not be on the seasons winners podium, but neither will you be in the graveyard.

Hi!

if I have new money to add to balance, do you think I should have cash ETF doing nothing?

[johnnywitt]

In addition to asset diversification, the PP includes individual assets volatility diversification. Blending high and low volatility assets is part of the PP's engine design.

Swapping to slick from regular tires may very well win one sunny day race, but prove to be critical in another rainy day race. End up with a overall worse case outcome average than had you just consistently stuck with the regular setup throughout. As does attempting to time assets also tend to broadly be worse than just sticking with the regular setup. Better to just look to consistently finish each race than roar ahead of others during some races, crash and burn in another. You'll likely not be on the seasons winners podium, but neither will you be in the graveyard.

Hi!

if I have new money to add to balance, do you think I should have cash ETF doing nothing?

Well, first of all, if you do this, you're gonna have to take down the HB Avatar.
Look, you do what you want, but I personally believe that just finding a portfolio that you have long term faith in and sticking with it is the key for future success in your investing career. If you want to deviate, with regard to the HBPP, then the VP is the place for that. I've got all kinda crazy A$$ stuff in other portfolios, but knowing the long term track record of the PP for my core retirement portfolio helps me sleep at night and balances out the highly speculative stuff like my Russian Equities (which are currently worth zero.)

[frugal]

In addition to asset diversification, the PP includes individual assets volatility diversification. Blending high and low volatility assets is part of the PP's engine design.

Swapping to slick from regular tires may very well win one sunny day race, but prove to be critical in another rainy day race. End up with a overall worse case outcome average than had you just consistently stuck with the regular setup throughout. As does attempting to time assets also tend to broadly be worse than just sticking with the regular setup. Better to just look to consistently finish each race than roar ahead of others during some races, crash and burn in another. You'll likely not be on the seasons winners podium, but neither will you be in the graveyard.

Hi!

if I have new money to add to balance, do you think I should have cash ETF doing nothing?

Well, first of all, if you do this, you're gonna have to take down the HB Avatar.
Look, you do what you want, but I personally believe that just finding a portfolio that you have long term faith in and sticking with it is the key for future success in your investing career. If you want to deviate, with regard to the HBPP, then the VP is the place for that. I've got all kinda crazy A$$ stuff in other portfolios, but knowing the long term track record of the PP for my core retirement portfolio helps me sleep at night and balances out the highly speculative stuff like my Russian Equities (which are currently worth zero.)

[stpeter]

Our very own Tyler wrote an excellent essay about the importance of cash in your portfolio:

https://portfoliocharts.com/2017/05/12/ ... -investor/

[yankees60]

Sorry! But each time I see the title of this topic I cannot help but think of this song!

https://www.youtube.com/watch?v=7uAUoz7jimg
Chicago - 25 or 6 to 4 - 7/21/1970 - Tanglewood (Official)

If you like this / them you should watch the video of their entire show that day. I've had it on several times. I'd seen them live 10 months prior and that show was somewhat similar to this one.

Sorry for taking this on a tangent but after looking at the topic title so many times I could no longer restrain myself!

Dualstow will send this elsewhere if he deems that necessary.

[Dieter]

Sorry! But each time I see the title of this topic I cannot help but think of this song!

https://www.youtube.com/watch?v=7uAUoz7jimg
Chicago - 25 or 6 to 4 - 7/21/1970 - Tanglewood (Official)

If you like this / them you should watch the video of their entire show that day. I've had it on several times. I'd seen them live 10 months prior and that show was somewhat similar to this one.

Sorry for taking this on a tangent but after looking at the topic title so many times I could no longer restrain myself!

Dualstow will send this elsewhere if he deems that necessary.

Same!

[frugal]

Hi

Can I consider net family wealth as part cash?

[Grinch]

Can I consider net family wealth as part cash?

why not, but then it will probably be above the bands for reballing

[seajay]

Can I consider net family wealth as part cash?

why not, but then it will probably be above the bands for reballing

Could count gold as cash. Cash = money = legal tender and American Eagle one ounce gold coins are USD50 legal tender. Coins used to be worth their weight, made of silver or gold.

In the context of the PP however, cash = short term treasury bonds (1 year), that are barbelled with long term treasury bonds (20 year) to combine to a central 10 year bond bullet. Dropping the 1 year to leave just the 20 year should be accompanied with swapping the 20 year for a 10 year bond fund. Still 50% weighted, along with 25% in each of stock and gold. That said the difference between thirds each stock/gold/10yrT and 25/25/50 is small. Allocations soon drift after initial loading to precise equal/whatever weightings.

In the strict sense cash is instantly redeemable. However with T+3 trading time to convert stocks/bonds to cash the difference is relatively small/trivial. With gold the conversion can be quicker, with a quarter ounce gold Eagle in your pocket a local shopping centre dealer might swap that out for $450/whatever dollar bills as quickly as another might spend time queuing up at a ATM to withdraw dollar bills.

[mathjak107]

Can I consider net family wealth as part cash?

why not, but then it will probably be above the bands for reballing

Could count gold as cash. Cash = money = legal tender and American Eagle one ounce gold coins are USD50 legal tender. Coins used to be worth their weight, made of silver or gold.

In the context of the PP however, cash = short term treasury bonds (1 year), that are barbelled with long term treasury bonds (20 year) to combine to a central 10 year bond bullet. Dropping the 1 year to leave just the 20 year should be accompanied with swapping the 20 year for a 10 year bond fund. Still 50% weighted, along with 25% in each of stock and gold. That said the difference between thirds each stock/gold/10yrT and 25/25/50 is small. Allocations soon drift after initial loading to precise equal/whatever weightings.

In the strict sense cash is instantly redeemable. However with T+3 trading time to convert stocks/bonds to cash the difference is relatively small/trivial. With gold the conversion can be quicker, with a quarter ounce gold Eagle in your pocket a local shopping centre dealer might swap that out for $450/whatever dollar bills as quickly as another might spend time queuing up at a ATM to withdraw dollar bills.

this is eaacly the reason i dont like to see the cash in the pp used as a general spending fund . it has an important job to do and you really shouldnt unbalance things

[seajay]

Can I consider net family wealth as part cash?

why not, but then it will probably be above the bands for reballing

Could count gold as cash. Cash = money = legal tender and American Eagle one ounce gold coins are USD50 legal tender. Coins used to be worth their weight, made of silver or gold.

In the context of the PP however, cash = short term treasury bonds (1 year), that are barbelled with long term treasury bonds (20 year) to combine to a central 10 year bond bullet. Dropping the 1 year to leave just the 20 year should be accompanied with swapping the 20 year for a 10 year bond fund. Still 50% weighted, along with 25% in each of stock and gold. That said the difference between thirds each stock/gold/10yrT and 25/25/50 is small. Allocations soon drift after initial loading to precise equal/whatever weightings.

In the strict sense cash is instantly redeemable. However with T+3 trading time to convert stocks/bonds to cash the difference is relatively small/trivial. With gold the conversion can be quicker, with a quarter ounce gold Eagle in your pocket a local shopping centre dealer might swap that out for $450/whatever dollar bills as quickly as another might spend time queuing up at a ATM to withdraw dollar bills.

this is eaacly the reason i dont like to see the cash in the pp used as a general spending fund . it has an important job to do and you really shouldn't unbalance things

You could consider the PP as a wallet, containing 'notes' of gold higher denominations, stocks, bonds, T-Bills lower denominations, but not instantly redeemable, instead having a T+3 lag.

Oh I'll have to break into a ounce of gold coin of recent 1920 USD value to add more VT (or TLT or SHY) 'notes' of each of around 90 recent USD value. Or swap some TLT for gold to have fewer lower denomination, more higher denomination 'currencies' in your wallet.

The guy next door is selling his little used low mileage pickup for ten ounces of gold and one TLT, one SHY and one VT share (around USD 20K) ... and as part of buying you opt to rebalance your wallet to have overall more comparable USD values in each of your four 'currencies'.

For smaller regular amounts use a credit card that you clear off each month using your PP wallet.

[frugal]

Hello

The PP without cash increases the risk and DD in a high percentage?

If we can rebalance with new fresh money, can we use 3xPP ?

I am in Europe

Kindest regards!

[I Shrugged]

What are cash interest rates now in the prosperous parts of the Eurozone?

I've been rolling over US T-bills and earning 5+%. Money market funds are around the same rates. So now cash is not trash, at least not on a gross or nominal basis. The rates are declining slightly but I don't see it heading to zero any time soon.

If you have much lower rates in Europe, I would consider buying 6-12 month T-Bills for the near term future. I am assuming you would be willing to take the currency risk.

Regarding the 33x3, I couldn't see having that much gold. Even though I like gold. If I was trying reduce cash, I would be looking at basic 60/40 plus "some" gold and some cash. Maybe it works out to 50-30-10-10, to keep it simple. Or 40-40-10-10. I actually kind of like the sound of that one if I was in the earning and accumulating phase, and more bullish. Having as little as 10% gold is still way better than 99.9% of the people in the world. I probably can say the same thing about having 10% cash.

[blue_ruin17]

Over the years, the cash slice of the PP has grown on me the most.

One of the reasons I love the PP is that it provides an integrated framework for merging "emergency funds" (i.e. x months/years of living expenses) into the portfolio management process: it gives cash a job; invites it to be a member of the pack; installs it as a vital cog in the machine. This is a practical advantage of cash that Sophie has frequently emphasized as really liking, as well.

I always laugh when someone states they are "100% stocks", yet the have 1-2 years of living expenses in cash... so, they aren't actually 100% stocks, then. This puts the PP at a disadvantage when it is backtested against other asset allocation strategies that exclude cash savings. I like to water-down portfolios with cash when comparing them to the PP for this reason. Alternatively, you can compare them to the 33x3 PP, but I dislike this approach because it doesn't model the PP's trademark stability. What you will find is that returns of most asset allocations, even the stock heavy ones, aren't nearly as impressive when you factor for the cash drag that the PP automatically accounts for.

Cash is oxygen. Incomes can be disrupted and disappear. My spouse and I both lost our jobs in the same month back in 2021. Words cannot describe the peace of mind provided by the 25% cash slug in the PP to depend upon, regardless of market conditions. I knew that, no matter what happens in the markets, that I could draw down on that cash for months before triggering a re-balancing band or selling assets at a loss if the PP is having a bad year (2022, anyone?).

William Bernstein described the importance of cash very aptly in Deep Risk:

Shallow risk mandates deep liquidity. If you do not have a large amount of highly liquid and safe reserves -- for the average individual, Treasuries and CDs -- you will not have the wherewithal to weather the employment setbacks that comes with turbulent markets, to purchase stocks at low prices, and to keep your courage up when you need it most.

...generous portfolio liquidity is the sine qua non of any successful strategy for investing, or for that matter, for life in general

Ironically, Deep Risk is largely a criticism of the PP, and Bill doesn't include cash in any of his suggested asset allocation schemes. I find this a little puzzling, given his clear recognition of the indispensable nature of cash. To me, Harry Browne's inclusion of cash as an integral component of the PP was genius, not arbitrary or misguided.

frugal, how reliable are those income streams that you mentioned? Are they guaranteed? My experience is there are no guarantees in life. Cash provides an indispensable buffer in case your "reliable" cash flow streams are disrupted.

If you don't like the cash drag imposed on the portfolio, here is one potential solution: decide the size of a cash emergency fund you want/require and multiple that number by 4. Maintain the PP at that level and dedicate the rest of your assets to whatever growth oriented strategy you prefer with the rest of your liquid assets. This way you always have a cash buffer to fall back on, and because it is contained in the structure of the PP you don't have to worry about the many vulnerabilities/risks that cash is exposed to. Kind of brilliant, actually! That's why I love the PP and have stuck to it since 2014.